HB 501 ' ^ -^ 



6^' 



o\ 



.M5 R4 Tfeg Stockbridge Booklets on Socialism. 

Copy 1 j^o. 11. 



AS\1^ 



Capital and Profits 

Containing 
A Criticism of 'Marx 
and 
The Next Step in our Industrial Evolution 



By David C. Reid 

Author of ''Effective Industrial Reform'' and editor of 
The Stockbridge Booklets on Socialism 



Copyrisht, 1912, By DAVID C. REID 



All rights reserved 
Published January, 1912 



Printed by Eagle Printing and Binding Co. 
PittsSeld, Mass. 



^ 



^^ 



CI.A303921 



The Stockhridge Booklets on Socialism 



No. 11 

Capital and Profits 



B}) DAVID C. REID 

Jluthor of ' 'Effectioe Industrial Reform ' ' and editor of 
The Stockhridge Booklets on Socialism. 



Chapter I. Capital and Profits — A Criticism of Marx. 
Chapter II. The Next Step in our Industrial Evolution 
— or The Stockbridge Plan. 



Profits are the indirect wages paid to labor. 

Democracy advances in its control of the social order by acquir- 
ing control, step by step, of the several organizations, of which 
the social order is composed. 

The author issues a friendly challenge to any person to prove the 
conclusions contained in this booklet to be untrue. 



The Stockbridge Socialist Press, 

Stockbridge, Mass. 

Price 10 Cents 



v.^' 



Y\^ 






INTRODUCTION. 

Socialism is itself in process of evolution. It has already passed 
through two stages of development. In the first stage, the so-called 
"Utopian," it caught sight of its chief aim, which is — to secure 
universal economic justice. In the second stage, the Marxist, it 
caught sight of the evil principle which socialism must overthrow, 
namely, that feudalistic capitalism or financial despotism which is 
the fundamental cause of economic injustice and wrong. 

But socialism must now enter upon a third stage of develop- 
ment and unfold the concrete plan of industrial reconstruction by 
which to overthrow industrial autocracy and secure justice and fair- 
play in the struggle for bread. 

But we cannot unfold the true method of industrial reconstruc- 
tion, until we obtain the right conception of the nature and function 
of Capital and Profits. It is the purpose, therefore, of this booklet 
to unfold the true view of Capital and Profits and point out that plan 
of industrial reconstruction which grows therefrom. 

The plan of reconstruction, which I have imfolded, was first 
adopted by the socialists of Stockbridge, and, hence, it may, very ap- 
propriately, be called the Stockbridge plan* 

*Note: — In the foot notes in most cases I have referred to De- 
ville's "The People's Marx" (done into English by La Monte), rather 
than to Marx's Capital for the former is more available than the 
latter. 



CHAPTER I. 

CAPITAL AND PROFITS— A CRITICISM OF MARX. 

The time is rapidly approaching when socialism must 
work out a definite concrete plan of industrial reconstruc- 
tion that will command the support of thoughtful minds. 

But before socialism can do this it must obtain a cor- 
rect view of the natiire and fimction of Capital and Profits. 
For an incorrect conception of these factors will be as 
fatal as an incorrect conception of labor and wages. 

Two contradictory views are entertained today con- 
cerning Capital and Profits. The first originated with 
Karl Marx, the father of modern socialism, and may be 
called the Marxist view. The second is the view taught 
in our schools today and may be called the modern scientific 
view. 

The Marxist view, briefly stated, affirms that labor pro- 
duces everything; that capital produces nothing] and that, 
therefore, all profits, — including rents, interest, and divi- 
dends, — are the plunder which capital exacts from labor ^ 
and, therefore, should be abolished. 

How Marx arrived at this conclusion concerning capi- 
tal and profits is easily understood. 

Marx made, we may say, a great discovery. He saw 
for the first time, in all its clearness, that the chief cause 
of the poverty and degradation of the laboring classes, lay 
in the fact that they were systematically oppressed and 
plundered by the capitalist class, which, under the plea of 
profits, robbed the worker of the larger part of the product 
of his labor. Marx's whole career consisted in one long 
effort to expose the injustice which modern capitalism 
commits against labor and to arouse the workers for its 
overthrow. 



CAPITAL AND PROFITS. 



His great work — Capital — contains the most powerful 
and yet the most just arraignment of modern capitalism 
that can be conceived. It was, indeed, an epoch-making 
book. It called the attention of the worker and the world 
for the first time in htiman history, to the existence of an 
all-powerful system of oppression and plunder, which the 
people had not been aware of before. And he made the 
workers see that though the modem capitalist class had 
no armies immediately behind its back,yet in its control 
of the economic necessities of life, it possessed a power to 
oppress greater than that of the ancient Caesars, and 
through its control of all the wealth and capital of the 
country, it was able to control also even governments and 
armies. 

For this work of exposing capitalist oppression and 
arousing the workers against it, Marx deserves all praise. 

But in the intensity of Marx's arraignment of modern 
capitalism, he failed to distinguish between what we may 
call a just and an unjust capitalism, and he failed to see 
the place which a just capitalism must occupy in our eco- 
nomic life. To him, capital was always the instrument of 
plunder. I have read and re-read his books and abridge- 
ments of them and he gives the impression on every page 
that to him capital is always predaceous. And the funda- 
mental assumption which imderlies every argimaent is, 
that labor produces everything, that capital produces 
nothing and that, therefore, all profits including rents, 
interest, and dividends, are but the plunder which capital 
exacts from labor. 

And this is the fundamental assumption underlying all 
Marxist literature. It falls from the lips of every Marxist 
orator. And this assumption is quietly taken for granted 
as if it were a self-evident truth to be accepted without ar- 
gument. And all thorough-going Marxists explicitely 
affirm that in our reconstructed industries under socialism, 



A CRITICISM OF MARX. 



all investment of capital for profits or dividends shall be 
abolished.* 

The position of modem economic science concerning 
the nature and function of capital is just the opposite of Marx 
and his disciples. Modern economics affirm.sthat capital, 
though it is the product of labor, is nevertheless, itself pro- 
ductive; that it earns a real profit or increase, over and 
above the labor employed in its use, and that this profit 
should justly go to the man whose labor created it or justly 
acquired it. In short, modern economics, distinguishes 
between a just and an unjust capitalism. It admits that 
modem capital robs labor. Nevertheless, it affirms that 
there is such a thing as a just profit which should go to 
capital. And it affirms not only that capital is productive, 
but that it occupies an essential place in our economic life. 

Now the problem which confronts us is — Which of 
these directly antagonistic views is true? 

Now I affirm that while Marx was right in his ar- 
raignment of modern capitalism and in his teaching re- 
garding the class struggle, yet he was wrong in his concep- 
tion of the nature and use of a legitimate capital. And 
we simply must distinguish between these two elements of 
his teaching. I ask, therefore, of all my socialist comrades, 
a careful consideration of the following criticism of Marx's 
whole teaching concerning Capital and Profits. 

2. 

In the first place, I affirm that Marx's definition of 
capital and its use is one-sided and misleading; and here is 
the beginning of his error. 



*Note: — The Appeal to Reason, a strong Marxist journal, says in 
the issue of Aug. 9th, 1910, in the column headed — "Asking About 
Socialism," — ^that under socialism "there will be no taking of interest" 
and "no profit-taking." And because of this, therefore, there will be 
no investments" under socialism. And it clearly implies that if un- 
der socialism a man should invest the sum of $100,000 in the indus- 
tries of the coimtry, he would receive nothing for its use. 



6 CAPITAL AND PROFITS. 

Marx identified capital with mere money, and with 
money employed to make an unjust profit. 

In the Fourth and Fifth Chapters of ''Capital,'' he de- 
fines "commercial capital" as money used in buying and 
selling for a profit; and he implies that the profit thus 
made, is always unjust*, — a proposition that is not strictly 
true. In the Chapters following Chapter V, he defines 
"industrial capital" as money used to hire labor for the 
purpose of making a profit out of the worker hy paying 
him less than his labor is worth. In short, capital, accord- 
ing to Marx, is always money employed for the making of 
an unjust profit. And he defines the capitalist as one who 
employs money for this purpose, f 

Now while we must admit that this extortion of unjust 
profits is the characteristic of modem capitalism and that 
this is the crime of the age which socialism is to abolish, 
nevertheless, I affirm that in this definition, Marx has 
given a one-sided and, therefore, incorrect and misleading 
definition of capital and overlooked its true use and func- 
tion. 

What, then, is capital! Two agents are employed by 
man in the supply of human needs. The first is man's own 
power to work; the second is the productive power of 
agents outside of man, which man uses, such as land, 
horses and machinery. 

Now the name which economic science applies to man's 
power to work is labor or labor power. The name which 
it applies to all those agents which man uses, outside of 
man, is capital. And these two agents must be carefully 
distinguished, if we are to do any correct economic think- 
ing. 

Capital may, therefore, be defined as embracing all 
those agents external to man which can be appropriated 

*See DeviUe's The People's Marx p 63. 
tibid p 59. 



A CRITICISM OP MARX. 



and employed by man in htiman service. Hence, land, 
horses and hens, when appropriated by man, are forms of 
capital, because they are external to man and can be em- 
ployed in useful service. Land produces wheat, horses 
draw loads, and hens lay eggs. For the same reason, lo- 
comotives, factories and himaan homes are all forms of cap- 
ital. And capital is nothing but nature's forces harnessed 
for the use of man.* 

Assuming that this definition of capital is correct, we 
see that Marx's definition is one-sided and misleading. 
For first, capital is something more than mere money as 
Marx implies. For money, (including stocks and bonds), 
is, strictly speaking, not capital at all. It is, in reality, 
only a title to capital. When a man holds a one-thousand 
dollar bill in his hand, that bill signifies, not that he owns 
a small colored piece of paper, but one-thousand dollars 
worth of the productive capital of this country. This 
great truth Marx has entirely overlooked. And here is the 
beginning of his error. 

Farthermore, we see that while capital especially in the 
form of money, is sometimes used for the purpose of plunder, 
yet this is not, as Marx implies, its only use, nor is this its 
primary use. For, as all can see, the primary and funda- 
mental use of capital, as embodied in land, horses, machin- 
ery and human homes, is to contribute to human service. 
And we see that capital, as thus defined, is an essential 
factor in human life and civilization. 

3. 

Second. I affirm, contrary to Marx, that capital, when 
correctly defined, is productive and performs an essential 
service for man. It earns a real profit for the owner. 

*Marx refers to these things incidentally under the title of "tools'^ 
or "means or instruments of production,^ ^ employed by labor. It 
never seemed to occur to him that these things have, in themselves, 
productive power; nor does he ever ask, consequently, to whom the 
earnings of these things should go. (See Deville's The People's 
Marx p 71 ff.) 



8 CAPITAL AND PROFITS. 

Here is a young man who begins adult life with two 
hands and two horses. His hands represent his power to 
work, his horses are his capital. Will any one say that 
those horses can produce nothing and perform no service 
for the owner? Suppose that the young man hires himself 
and team to plow a field. Will anyone be so hardy as to 
say that the horses do nothing toward the plomng of the 
field? 

The capital now invested in American industries and 
homes amounts to 120 billions of dollars in gold. It em- 
braces farms, cattle and horses, factories, railroads,tele- 
phones and telegraphs, coal-mines and oil-wells, and hu- 
man homes. Will any one say that all this capital pro- 
duces nothing and performs no useful service for man? 

If all this capital were suddenly annihilated today, it 
would require 25 years of toil on the part of the combined 
adult male population of the country to reproduce it. 
Now if all capital were unproductive, if it performed no 
useful service for man, why should men spend these many 
years of the severest toil of hand and brain in creating it? 

The fact is that capital is enormously productive, and 
the use of capital marked the very beginning of civiliza- 
tion. The primitive man who first caught a cow and, in- 
stead of killing and eating her on the spot, corralled her 
and made her work for him was a capitalist. The cow 
was his capital and he coralled her because she was pro- 
ductive. — She furnished him with milk, butter and veal; 
and these were his profits from the cow. When man thus 
learned the use of capital, he acquired one of the most 
fundamental factors of civilization and without capital 
civilization would perish. Indeed, in the future, capital 
will play an ever increasing importance in human life. And 
if the time shall come when, as some socialists aver, four 
hoiirs work per day will supply all our material necessities, 
it will be only because we shall have acquired so much 



A CRITICISM OF MARX. 9 

capital and made it so productive that we can, so to speak, 
sit still a good part of the time while our capital, — that is, 
our farms, horses and machinery are working for us. 

Third. But if capital is productive, then the profits 
which are earned by capital, however great they may be, 
should go, in every case, to the man who rightly owns the 
capital, that is, to the man individually whose labor created 
it or justly purchased it. And if two or more men go into 
business together, then, these profits should be divided just- 
ly according to the amount of capital invested by each. 

For, as I have said, the production of capital costs la- 
bor; and it often costs many years of the severest toil. 
Hence, the man who undergoes self-denial and toil in the 
creation of capital and the harnessing of nature's forces, 
has the right to receive all that this capital or these forces 
really produce. 

For take again the illustration of the young man with 
the two horses. Those horses, we will suppose, are the 
product or purchase of his own toil. Who will say, there- 
fore,that the earnings of those horses,say $2.50 a day,should 
not rightly go to him? 

And I maintain that the earnings of the horses should go 
to him whether he drives the team himself or hires some 
one else. I affirm this because Marxists everywhere say 
that the products of capital should go to the owner only 
when he uses it himself. I have repeatedly asked of Marx- 
ists, individually and when met together in local meetings, 
this question, — "If one man borrows another man's horse 
should not the borrower pay something for its use? — and 
the unanimous reply has been — "No." "If one man lives 
in another man's house should not he pay the owner a ren- 
tal for the use of the house?" "No." "If one man bor- 
rows another man's money should not the borrower pay 
interest for the use of the money?" "No." And I have 
heard Marxist speakers say or imply on the platform that 



10 CAPITAL AND PROFITS. 

if two or more men put capital into a business and hire 
men to work for them, the owners of the capital should re- 
ceive no profit or dividend on their capital. On the con- 
trary, all, absolutely all, the products of both the labor 
and the capital should go to the hired men, the men who 
do the work. 

Hence, Marxists say that when the owner of the horses, 
in the case cited before, hires another man to drive the 
team, the hired man should receive the combined earnings 
of himself and team, or S5.00 a day. Now in this affirma- 
tion, I maintain that Marxism is wrong. For the plowing 
of the field is the product of the combined labor of the hired 
man and the team. The hired man should receive the 
full earnings of his labor, say $2.50 a day. But the earn- 
ings of the team should go to the owner. 

Again, suppose that a man puts several years of hard 
labor of hand and brain in the building of a saw-mill, and 
owing to illness, must hire a man to run the mill for him. 
Will not every intelligent man say that while the hired man 
should receive the full earnings of his labor, yet the owner 
should receive the full earnings of the mill? For the mill is 
productive. It earns an income in addition to the work of 
the hired man who runs it. And this should go to the 
owner. Not to allow this, will rob the owner of all the 
years of toil put into the creation of the mill and deprive 
him of all means of support. And yet all Marxist litera- 
ture with which I am acquainted implies that since the 
owner does none of the work in the nmning the mill, he 
should receive nothing. The hired man, on the contrary, 
should receive all, — absolutely all, — the combined earn- 
ings of himself and the mill! 

How men can come to such an unjust conclusion is 
easily understood when we read Marx's Capital and at- 
tend to Marxist speeches generally. For the word ''prof- 
it" in all Marxist literature and speeches is made to be 



A CRITICISM OF MARX. 11 

synonymous with ' 'plunder." Holding fast to the dogma 
that labor produces everything and capital nothing, the 
Marxist conclusion is inevitable that the hired man should 
receive all the combined product of himself and the mill. 
But such a position is sheer robbery — a robbery as out- 
rageous as that ever perpetrated by capital against labor. 

Some Marxists say that the man who built the mill, 
should receive back the equivalent of the labor which he ex- 
pended in the creation of the mill, and no more. But this 
also would be grossly unjust. For the capital which we 
employ, as a rule, produces far more than the mere equiva- 
lent of the labor expended in its creation and use. A team 
of horses will do far more work than the mere equivalent 
of the labor expended in their production and care. A 
steam locomotive will do a hundredfold more work in the 
aggregate than the equivalent of the labor put into its 
creation and employment. 

Hence, the man or men who have expended labor and 
self-denial in the creation of a utility or in the harnessing of 
nature's forces, — have a right to receive back far more 
than the mere equivalent of the labor which they expend- 
ed in the creation of the utility and the harnessing of the 
forces. 

Hence, for a group of men, who have done nothing to- 
ward the creation of the sawmill ^ to say to the owner, — "we 
will pay you ''in dividends" the equivalent of your past 
labor expended in the creation of the mill, and after that 
all further payments to you will cease, is again sheer rob- 
bery. 

For the man created the mill in order to earn an income 
from it, and he has the right to hold it for that purpose and 
earn an income from it as long as it lasts. 

Fourth. Assimiing then that profits, when correctly 
defined, are just and should go to the man who owns the 
capital, another proposition is true, namely. — Rents paid 



12 CAPITAL AND PROFITS. 

for the use of capital are legitimate when not in excess of 
the actual earnings of the capital used. 

In human society, men must frequently exchange not 
only their labor but also the use of each other's property 
or capital. Now, suppose that a neighbor desires the use 
for a week or a month, of the young man's horses, cited 
above. Should not the neighbor pay something for their 
use? For with their help not only is his own work made 
more valuable, but the horses perform a service for him be- 
sides. Should he not, therefore, pay to the owner what 
their labor is worth? But such payment for the use of an- 
other person's property or capital, is rent. And it is per- 
fectly just. Not to pay rent is robbery. 

But if rents are right, then interest on money is right. 
For money represents productive capital, — such as land, 
horses, cows, machinery, locomotives and so forth. In- 
terest, therefore, is but the rental demanded for the use of 
those things which money represents. 

Finally, if profits, rents and interest, are right, then 
dividends are right, for they are but the profits divided 
between two or more men who put their capital into a 
common business and divide the legitimate earnings of 
their capital according to justice. 

I maintain, therefore, that capital when correctly de- 
fined is productive and in every case the profits or increase 
earned by capital, should go to the man who rightly owns it. 

It may be difficult to determine, off-hand, what capital 
should rightly receive; and, certainly, labor should re- 
ceive, as Marx affirms, its due share of the products of past 
inventions and the increase arising from the proper divis- 
ion and cooperation of labor. Nevertheless, it is still true, 
that when a man puts labor into the creation of capital, he 
should receive the earnings of that capital. And until 
Marxists see and admit this, they cannot arrive at any just 
method of reconstructing the industrial world. 



A CRITICISM OF MARX. 13 

4. 

Again Marxism is wrong in implying that the only leg- 
itimate source of income for any man is the immediate 
fruit of labor. 

Marxism, beginning with the fundamental proposition 
that labor produces everything and capital nothing, has 
been led by the inevitable logic of its position to imply that 
the only legitimate source of income for any man is the 
immediate fruit of labor. All income, in the form of rents, 
interest and dividends, being the robbery exacted by capi- 
tal from labor, must be cut off. Hence, in the reconstruc- 
tion of oiir industrial system, Marxism avows its purpose 
to allow no man to invest any capital in the public industries 
for profit.* Consequently, it will cut off all possibility of 
earning an income from any source except from the wages 
paid for labor. 

Now, I hold that, in this, Marxism is unscientific, im- 
practicable and can never win the support even of the in- 
telligent working class, which socialists chiefly aim to win. 
For I maintain that there are two legitimate sources of in- 
come for every man. The first is his ability to work, the 
second is the earning power of his capital. 

Take the young man who begins life with two hands 
and two horses. He certainly commands, as I have shown, 
two sources of income; first, his hands or ability to work, 
and, second, his horses or capital. Each of these sources 
earns for him $2.50 a day. He therefore, possesses two 
distinct sources of income. And both are legitimate. 

But let us carry the illustration a little farther, let us 
suppose that by honest labor he produces or buys two 
other horses, and these he rents to his neighbors netting 
him say $50 a year. What now are the sources of his in- 
come? The first source is his two hands, just as before. 



*See foot note on page 5. 



14 CAPITAL AND PROFITS. 

This source has not increased. But his second source is 
now four horses instead of two and his income from this 
source is now $100 a year, just double what it was before. 
And this additional income from his capital is perfectly 
legitimate. In receiving it, he robs no one. For the 
whole additional income is earned by the two additional 
horses which he owns. 

5. 

This fact that capital is productive and is a legitimate 
source of income, has given birth to one of the most im- 
portant factors in our economic life. It provides the way 
by which to free one's self from the slavery of toil. 

For a man's ability to work does not materially in- 
crease after he reaches twenty years of age. Each man 
begins life with two hands and ends life with two hands. He 
cannot increase their nimaber; on the contrary, he may 
lose their use by injury or sickness or old age. Hence, if 
a man is dependent on his two hands alone for support, his 
life of necessity will be limited and uncertain and he must 
always be tied like a slave to his work. 

But though a man cannot increase the number of his 
hands, he can, nevertheless, increase while young,the 
amount of his capital. The young man with two horses 
can increase them to four, six, eight, ten, and, thereby in- 
crease his earnings from this source a hundredfold. If, 
therefore, a young man desires to increase his earning 
power and free himself from the slavery of toil, — if he de- 
sires to prepare for a larger life and provide for sickness and 
old age, it is imperative that while young, he shall acquire 
and increase his capital and its earnings. 

Now, it is this fact that has given birth to a most im- 
portant factor in otir industrial life, namely, the effort on 
the part of the thrifty to acquire and increase their capital 
while young so as to free themselves from the slavery of 
toil while old. And this ambition is one of the most fun- 



A CRITICISM OF MARX. 15 

damental factors of human life. It lies at the foundation 
of all civilization and must in no case be cut out. Indeed, 
every thrifty person makes three imperative demands of 
our industrial system. The first is the demand for work 
at a just wage, the second is the demand for needed utili- 
ties at a fair price, and the third is the demand for oppor- 
tunity to invest his savings with safety, profit and per- 
fianency, in the industries of his country so as to free him- 
self from the slavery of toil. 

And here we see the necessity of keeping a distinct ac- 
count of the earnings of a man's work on the one hand, and 
the earnings of his capital on the other. Marxists have 
asked — "What difference does it make whether we pay 
the earnings of our industries to the workers in the form of 
wages, or partly in the form of wages and partly in the form 
of dividends? Discerning economists reply that it makes 
all the difference in the world. For all men do not save 
and invest the same amount of capital, at the same time, 
nor do they do the same amount of work. 

Here is a young man of 21 years, who has only $500 
invested in his country's industries, but, being young, he is 
willing to work every day in the year so as to earn and in- 
vest more. But here is another man of 40, who has 
$10,000 invested, but desires to take a week's vacation oc- 
casionally. And here is still another man of 50, who has his 
full quota of $15,000 invested, and desires to stop work 
entirely. Now it is evident that to pay the whole earnings 
of the industry to these three men in the form of wages 
would be most unjust. For in that case the young man, 
though having the least savings invested, would receive 
more than either of the other two; and the man at fifty, 
when he stops work, would, though having $15,000 invested, 
receive nothing at all. In short, he would be robbed of 
the entire earnings of his capital and would have no means 
of support in his old age. 



16 CAPITAL AND PROFITS. 

In order to get justice, therefore, it is imperative that 
we keep a strict account of each man's work and pay him 
for all the work he performs ; keep a strict account of what 
each buys and make him pay for all that he buys ; and keep 
a strict account of the capital that each invests, and pay 
him a just dividend on all that he has invested. If, then, 
a man desires to stop work when, at 50 years of age, he has 
$15,000 invested in his country's industries, he can do so 
and yet not be robbed of his dividends which are the just 
fruits of previous years of toil. 

We see, then, that profits and dividends not only are 
just, when not in excess of the actual earnings of capital, 
but they are also an essential factor in our economic life 
and must be kept distinct from the earnings of labor. And 
we see that the service which our industrial system, even 
under socialism, must perform for every man is threefold. 
First, it must provide him with work at a just wage; sec- 
ond, it must supply him with utilities at a fair price; and, 
third, it must provide him with a place where he can in- 
vest his savings, earn a dividend from them, and so free 
himself from the slavery of toil. A system that fails to per- 
form this three-fold service is defective and cannot meet 
the needs of the community. 

Now the third and chief defect of Marxism is that it 
repudiates this third factor on the fallacious plea that aU 
investment of capital for profit is wrong. When Marxism 
comes into power, it will turn our industries over to the gov- 
ernment to be run on the same basis as the United States 
mail. No man will be allowed to invest any capital in any 
socialized industry. The whole income accruing to each 
man, therefore, will be in the form of wages paid to labor. 
Hence, as soon as a man stops work, his income will cease. 
And it will be impossible for any man to make adequate 
provision for leisiire, for travel or extended sickness or 
old age. 



A CKITICISM OF MARX. 17 

To remedy this evil fruit of their teaching, some Marx- 
ists propose to pension every man when a certain age is 
reached. But this will result only in paying dividends to 
everybody in a disguised form, and in rewarding the shift- 
less classes equally with the thrifty and industrious. 
Worse than this, it will cut the knot of individual responsi- 
bility and enable the idle and thriftless classes to forcibly 
load themselves onto the backs of the industrious. It will 
in fact, result in ''the equal division of unequal earnings." 

Marxism is, therefore, seriously defective and unscien- 
tific in its teaching concerning capital and profits. A little 
reflection will show that, in relation to capital, it is not 
strictly socialistic, but communistic. It is communistic 
capitalism. It does not embody, therefore, a true indus- 
trial democracy ; it is not, in this one item, strict socialism. 

6. 

Marx and his disciples commit a serious error in at- 
tributing the evils of our present system to capitalism as 
such, that is, to the mere process of investing capital for 
profits. For they not only give a wrong diagnosis of the 
case, but lead their followers to repudiate the crowning 
factor in our economic life. 

All Marxist speakers and writers imply that the one 
cause of present industrial -wrongs is the seeking of profits 
and that if we would only abolish the taking of profits all 
evil would disappear. But I maintain that the mere fact 
that men seek for profits has no more to do with the origin 
of present wrongs than the fact that all men eat food and 
wear clothes. And the abolition of all profits, in the form 
of rents, interest and dividends, would not lessen present 
evils by a single hair's breadth. 

The source of present wrongs is twofold. First, in the 
anarchistic policy which underlies our present system and 
makes the struggle for wealth to be a free-fight-for-all in 



18 CAPITAL AND PROFITS. 

which all justice, either in relation to wages and salaries, or 
prices or dividends, is simply impossible; and second, in 
the seizure and control of the whole business world by the 
all-powerful, and irresponsible business corporation or 
Trust to which our anarchistic policy of necessity has given 
birth. For, through this seizure and control of the business 
world, the Trust is able to appropriate the whole product 
of both labor and capital, whether in the form of wages 
and salaries or prices or dividends or graft unspeakable. 

The thing, therefore, which socialism should attack is 
not the taking of profits nor the investing of private sav- 
ings for an income, but the anarchistic basis of our present 
industrial system, on the one hand, and the seizure and 
control of the whole business world by the despotic cor- 
poration or Trust, on the other. 

In short, we must demand the abolition of both an- 
archism and despotic power from the industrial world, 
and establish a true industrial democracy in their place.* 
We must make the people collectively to be the business cor- 
poration and then turn the whole industrial world over to 
their sovereign control. For, then, we will have justice in 
relation to wages and salaries, prices and dividends, and 
there will be no spoliation. 

But Marxism, instead of doing this, opposes the taking 
of profits and the investing of one's savings for gain, which, 
as we have shown, is a legitimate and necessary factor in 
our economic life. 

Farthermore, in thus discrediting all profits, Marx has 
lead the people to repudiate the most important factor of 
civilization. For I maintain that to save and invest one's 
savings for a just income is not only right, but it is the 
foundation of material prosperity. Through the just ac- 

*President Taft's seeking to cure industrial despotism by 
forcing business back to that industrial anarchism out of which despo- 
tism sprang, is sheer folly. 



A CRITICISM OF MARX. 19 

quisition of capital, the young man acquires independence, 
and protects his wife and children from want. To acquire 
capital is not necessarily, as Marx implies, a scheme to rob 
labor. Neither is it, therefore, something necessarily 
ignoble and base.* Indeed, the young man who not only 
works but also saves and invests for a future income, is 
nobler than the man who merely works and devours all as 
he goes along. 

Hence, I affirm that instead of crying — ''Down with 
capital" — we should say — ''Up with the right of every 
man to be a capitalist." And our motto should be not 
only — "Everyman to receive the full earnings of his labor," 
— but also — "Every man to be a capitalist and receive the 
full earnings of his capital." 

7. 

In conclusion, I would say that Marxism by its aboli- 
tion of all investment of individual savings for gain and 
the consequent putting of all alike on the pension system 
creates the chief obstacle today in the way of socialist vic- 
tory. 

Socialist leaders frequently ask, — "Why, when socialist 
sentiment is so wide-spread, are votes for the socialist 
party so few?" "Why especially do not the intelligent 
working people come into the socialist party?" 

Have these leaders ever thought that the cause might 
lie, in large part, in the defective economics of Marxism, 
— economics which sensible people cannot accept? 

In the year 1909, I listened to an address in Schenec- 
tady, by one of the most eloquent socialist speakers. An 
undiscriminating listener might wonder how any person 



*Note : — It is a fact that Marx condemns the teaching of what he 
terms "bourgeois political economy" that "the first of civic duties ia 
to accumulate capital." And Marx condemns such accumulation 
on the quiet yet false assumption that all such accumulation is al- 
ways employed for the robbery of labor. See Deville's The People's 
Marx pp. 227-232. 



20 CAPITAL AND PROFITS. 

could resist the speaker's appeal. But at the close of the 
address, a gentleman in the hall asked, — "If socialism 
should come into power tomorrow, what would become of 
the working man's savings in the savings bank?" 

The lecturer's reply practically was, that the working 
man's savings would be appropriated by the socialist state 
and absorbed in the general capital of the country. The 
recompense to the working man, for this confiscation of his 
savings being the greater good that will come to him 
through the establishment of social democracy.* 

Now, I maintain that it is this teaching which creates 
the chief obstacle in the way of socialist victory. For in- 
telligent working men can see that Marxism is capitalist 
commvinism. They can see that, while repudiating all 
dividends, Marxism will in reality bring them hack in the 
disguised form of pensions, to be paid to the industrious 
and the shiftless classes alike. But, in doing this, it will 
take the dividends earned by capital, put them into a com- 
mon pot, and divide them equally between the idle and the 
industrious classes. It will thus secure "the equal divi- 
sion of unequal earnings." And, in doing this, it will cut 
the knot of individual responsibility, and enable the shift- 
less classes forcibly to load themselves onto the backs of 
the thrifty and industrious, f 

Farthermore, the Marxist promise to place all men, 
when sick and old, on a pension and so make them the 
wards of the government, does not appeal to the thrifty 
working man. 

As I have said before, there are three essential factors in 
our economic life. The first is the right to work and earn 
a just wage; the second is the right to buy at a just price; 
and the third is the right to invest one's savings in our 

*Note: — Most Marxists no longer say that they will confiscate 
the working man's savings, but only that he will receive no dividends 
from them. 

fSee Reid's Effective Industrial Reform pp. 1S8-190. 



A CRITICISM OF MARX. 21 

country's industries, and so free one's self from the slavery 
of toil. 

Now what the industrious worker wants is not the 
abolition of any one of these factors, least of all, the third, 
but justice in their operation. And a communistic system 
that will allow nobody to invest and then place all on the 
pension roll alike does not meet their demands. They 
want a system that will bring justice and protection alike to 
all in each economic function and so enable each man to 
pension himself, justly, according to his true ability, 
thrift and actual worth. 

Until socialism, therefore, can present a definite scheme 
of industrial reconstruction that will secure these ends, 
socialism cannot prevail. I know whereof I speak when I 
say that a large part of the thoughtful and intelligent 
working men, farmers, teachers and others in America, have 
carefully studied the Marxist teaching regarding capital, 
rents, profits and dividends, and have deliberately rejected 
it. And already the foes of socialism are seeing this weak- 
ness in our position and using it for our overthrow.* 

9. 

What then is the just view for us to take concerning 
the nature of Capital and dividends and their place in our 
economic life? 

First. We see that capital, when correctly defined, is 
not identical with mere money as taught by Marx, but 
that it embraces all those agents external to man which 
may be appropriated and employed in human service — 
such as land, horses, cattle, machinery, factories, and hu- 
man homes. Capital is nature's forces harnessed for the 
service of man. 

Second. Capital as thus defined is productive. It 

*Note: — See editorial in the New York Evening Post, Nov. 1st, 
1910, in relation to discussion in the Times between J. G. Phelps 
Stokes and Prof. Irving Fisher. 



22 CAPITAL AND PROFITS. 

earns a profit ; and the earnings of capital should go to the 
man or men, individually, whose labor created it. 

Third. Every man even under a socialized industrial 
system should possess two sources of income. First, the 
earnings of his labor, and second the earnings of his in- 
vested capital. And the earnings of the one are as essen- 
tial as the earnings of the other, for it is through the acquisi- 
tion and earnings of capital that each man must free him- 
self from the slavery of toil, and provide for sickness and 
old age. 

Fourth, hence, the thing which we are to secure, in our 
reconstructed industries, is not the abolition of the indi- 
vidual acquisition and ownership of capital, but justice in 
its acquisition, and justice in the distribution of its earn- 
ings. 

Fifth, hence, the service which our reconstructed in- 
dustrial system under socialism must perform is threefold. 
First, it must provide each man with work at a just wage; 
second, it must provide him with needed utilities at a fair 
price; and third it must provide him a place where he can 
invest his savings, make them work for him and, thereby, 
free himself from the slavery of toil. An industrial system 
that fails to perform any one of these functions, especially 
the last, is defective and cannot win the support of the race. 

Sixth, therefore, in order to remedy present wrongs, 
we need a new industrial system that will not only over- 
throw industrial autocracy and make the people supreme, 
but will also perform every one of the three functions 
just named. And instead of abolishing the individual 
ownership of capital and the earnings of dividends, we 
must make them to be the crowning factor in the new plan. 

Assuming that these conclusions concerning capital 
and profits are correct, what Plan must we adopt in the 
reconstruction of the industrial world? What must be 
the next step in our industrial evolution? 



CHAPTER n. 

THE NEXT STEP IN OUR INDUSTRIAL EVOLU- 
TION—THE STOCKBRIDGE PLAN. 

The grand agent or organization through which prac- 
tically all our industrial activities are carried on and 
controlled today is the modern consolidated business cor- 
poration. For the modern consolidated business cor- 
poration has come to be to the industrial world what 
government is to the political. It is the grand instru- 
ment of industrial consolidation and control. 

The modern business corporation is no artificially 
created thing. It is an evolution of modern times. It is 
the product of modern economic necessities. Its coming 
was inevitable and like civil government it has come to be 
a necessary factor in the social order and it has come to 
stay. 

Our industrial system in America, was based in the be- 
ginning upon pure industrial individualism or anarchism. 
Our policy made the struggle for bread to be a free-fight- 
for-all in which the best man was expected to come out on 
top. But such a policy was intolerable and could issue 
onlyin the gradual evolution of a consolidated industrial or- 
ganization under one centralized control. Our industrial 
evolution has issued in this result. And today we see our 
industrial activities, actually or rapidly coming to be, 
consolidated into one vast whole under one centralized 
administration. 

But this unification of the industrial world under one 
centralized power could be achieved only through the 
creation of a new and all-powerful agent or institution 
adapted expressly to that end. And economic necessity 
has created the agent or institution that was needed, name- 



24 CAPITAL AND PROFITS. 

ly, the modern consolidated business corporation. For 
the modern business corporation has come to be to the in- 
dustrial world what government is to the political. It is 
the grand instrument of Industrial consolidation and con- 
trol. 

Indeed, it is through the unjust seizure and control of 
the consolidated business corporation that a band of 
strong men now plunders and oppresses us. 

2. 

Do we ask, then, how shall the state emancipate the 
people from industrial tyranny and, at the same time, pre- 
serve for capital and profits their true place and function? 

In order to achieve these ends, I affirm, that the state 
must not turn our industries over to the government, as is 
advocated by some; but it must give to the people, col- 
lectively, supreme ownership and control of the consolidated 
business corporation. In short it must make the people 
to be the business corporation, with authority to acquire, 
own and operate the consolidated business world in the in- 
terests of the whole people and for the profit of all. 

Here, for example, is a town held within the predaceous 
grasp of an Electric-light corporation. Now, how shall 
the town free its people from such predaceous grasp? In 
order to achieve this end, I affirm that the town must con- 
stitute the whole people, by law, into an Electric-light cor- 
poration with authority to acquire, own and operate its own 
Electric-light plant. In short, the people must be the 
Electric-light corporation. And, organized after strictly 
business principles, they must run the Electric-light plant 
for the profit of all. 

Thus democracy, which has already acquired supreme 
control of the government and of education, must now ac- 
quire supreme ownership and control of the consolidated 
business corporation and thereby acquire supreme owner- 
ship and control over the whole industrial world. 



THE NEXT STEP IN OUR INDUSTRIAL EVOLUTION. 25 

But can we do this, and, at the same time give to capi- 
tal and dividends, their true place and function? Yes we 
can and we shall. For we shall organize the people's con- 
solidated business corporation after strictly business prin- 
ciples. And this means that we shall call for and require 
the individual subscription and ownership of the capital, 
just as in the private business corporation, and we shall 
make our reconstructed industries, under socialism, to 
serve as the agent of the whole people for the production, 
not of commimistic, but individual wealth and gain. 



What then are the specific demands which we make for 
the proper reconstruction of the industrial world? What 
are the fundamental features of our concrete plan? 

In the first place, — ^We demand that the government 
from town to nation shall constitute the people, by law, 
into a single, Consolidated Business Corporation, with 
authority to acquire, own and operate every industry 
which the welfare of the people may demand; and that the 
whole industrial world shall be consolidated and placed 
under the people's sovereign ownership and control. 

In the second place. — ^We demand that in the acquisi- 
tion of each plant or industry, the capital shall be indi- 
vidually subscribed and owned, just as in the private cor- 
poration, and that each citizen shall be required by law to 
subscribe his proper quota, — giving each time, if he cannot 
pay it all in at once. 

In order to make this capital secure, we demand that 
the government guarantee shall be placed behind every 
dollar invested. 

If, in the introduction of this plan, the people are not 
able to subscribe at once all the capital needed — ^which will 
be the case, — ^the government shall be required to sub- 
scribe or give its bond for the remainder, and the plant shall 



26 CAPITAL AND PROFITS. 

at once be taken over and placed in the immediate owner- 
ship and administration of the people. 

But as soon as the people are able, this amount that 
has been supplied by the government, shall, of course, be 
taken up and subscribed by the people individually as this 
plan requires. 

Thus, we shall make each man to be a sovereign capital- 
ist factor and shareholder in the consolidated business cor- 
poration. 

In the third place. — ^We demand that dividends shall 
be paid on all the capital invested just as in the private 
business corporation — ^and that the government shall 
guarantee a minimum dividend of, say 5%, and as much 
more as we can make our industries pay, up to say 10% , 
— the government to receive, of course, the dividends on 
the amount that it has subscribed, like any other investor, 
until such amount shall be taken over by the people. 

By this provision, we shall give to capital and profits 
their true function. We shall secure justice to every in- 
vestor and make it possible for every man to free himself 
from the slavery of toil. 

In the fourth place. — ^We demand that the people shall 
have authority to elect and call to account their own direc- 
tors, or better, the president of each plant. But we de- 
mand that no man shall be a candidate for any such office 
unless he shall be a graduate of some approved school of 
business and technology, and shall have served a prescribed 
term of years in a lower position sufficient to put his ability 
to the test; and, second, that no man shall vote for such 
director or president, unless he shall have paid in a certain 
prescribed part, as say one-tenth, of his required quota of 
the capital. 

In the fifth place, — ^We demand that justice shall be se- 
cured in relation to wages, and salaries by having them 
fixed, relatively, — ^not by competition, but rationally, ac- 



THE NEXT STEP IN OXJR INDUSTRIAL EVOLUTION. 27 

cording to justice, by a Board of comxaissioners chosen an- 
nually to that end. 

In the sixth place, — ^We demand that adequate rules 
shall be made to protect each man's right to invest equally 
with every body else. We shall make it so that if a man 
should, through evil habits, fail for a time to invest his 
quota, yet should he reform and come to the industrial of- 
fice, he could then begin to invest his full quota. 

For an enumeration of these Rules and Regulations we 
must refer the reader to — ^^ Effective Industrial Rejorm^^^ 
(Chap. VIII). Suffice to say here that each man's in- 
vestment or ''stocks" shall always be at par; there shall 
be no buying and selling of "stocks "between man and man 
whatsoever; each man shall come to the industrial office 
and pay in his money and that shall be the end of the mat- 
ter so far as his investment is concerned. 

Each man's investments shall be classified into Pre- 
ferred investments and Surplus bank deposits. 

Each man's Preferred investments shall be limited to 
a certain prescribed amount — corresponding to the aggre- 
gate capital of the country, as, say, to $500 per year, 
until his full aggregate quota is in, as, say, $15,000, (for 
self and wife). There shall be no limit to the Surplus 
which a man may deposit in the public bank — only this sur- 
plus shall draw no interest until all the Preferred investments 
are provided for. Investments may be withdrawn at any 
time providing the Surplus bank deposits permit it. But 
in all such cases of withdrawal, the money may be re- 
invested at any following investment time at the option 
of the investor. 

In the seventh place, — ^We dem^and that each man shall 
be allowed to convert his savings into an annuity which 
shall embrace a fixed and a variable part, — ^to be paid to 
himself or wife during life, or at death to his orphaned chil- 
dren until they come of age; or each investor may, so long 



28 CAPITAL AND PROFITS. 

as present laws of inheritance exist, continue to draw his 
regular dividends and, at death, allow his capital to go to 
his heirs. But when a man dies we demand that all his 
capital shall be paid in cash (or in the form of a surplus 
deposit) to his heirs; for when a man dies, his capital must 
go out with him, to give place to the next generation. We 
shall thus prevent any man's loading his children onto the 
backs of the people to unending genera.tions, as is done to- 
day. 

In the eighth place, — ^We demand that the members of 
each new generation shall be called upon, when coming of 
age, to invest their regular quota, from year to year, and so 
take the place of those who die. 

In the ninth place. — ^We demand that our public school 
shall be correlated with this plan. We shall train every 
child for life and make each to be, as far as possible, an ex- 
pert worker in his vocation, even though it be only that of 
the digger of a ditch. And we shall train each child in the 
principles of economic justice and industrial democracy as 
embodied in this plan. 

In the tenth place, — We demand that this plan, when 
it shall be adopted by a majority vote, shall be introduced 
by law and carried out by law.* It is to be no voluntary 
thing, subject to individual choice or caprice. When it is 
once adopted by a majority vote, its introduction and oper- 
tion shall be compulsory, like our public school system or 
our Post office, and the whole people shall be required to 
stand or fall with the consolidated business corporation. 

5. 

Such are the fundamental features of our concrete plan 
of industrial reconstruction. Its distinguishing charac- 
teristics are, — first, it makes the whole people collectively by 



*Note: — Certain reviews of my book, — Effective Industrial Re- 
form — have misrepresented its character as teaching a phase of 
"Christian Socialism" to be introduced by moral suasion. 



THE NEXT STEP IN OUR INDUSTRIAL EVOLUTION. 29 

law to be the consolidated business corporation, and secondly, 
it organizes this consolidated business corporation after 
strictly business principles', in particular, it gives to capital 
and profits their true place and function. 

In taking over a private industry, we declare our will- 
ingness to acquire ownership of all industries by honest pur- 
chase. But we refuse to pay for watered stock, or for 
worn-out or looted industries. We also declare our pur- 
pose to force men to relax their grip on stock that can be 
shown to have been gotten by fraud or dishonest profits. 
By the enforcement of this measiire, we shall be able to 
compensate those who might otherwise suffer in the pro- 
cess of readjustment and we shall provide annuities for all 
aged workmen and others who have been left helpless by 
the present evil system. 

In the acquisition of a new industry, the following 
measures shall be taken. First, the government shall ap- 
point a Commission of experts carefully to appraise and re- 
port on the true value of any one or all the industries which 
the people have decided to acquire. Second, the govern- 
ment shall then call upon each citizen to subscribe and pay 
in his quota of the Preferred stock investments, and to say 
how much of surplus deposits he is willing to make. Third 
the government shall then be required to subscribe or give 
its bond for an amount sufficient to make up the full quota 
of capital demanded. Fourth, the desired industries shall 
then be taken over, at once, by the government and placed 
in the possession and management of the people. 

Practicability of this plan. We affirm that this plan of 
industrial reconstruction is perfectly safe and perfectly 
practicable and could be put into operation tomorrow, if 
the people so desired. 

It is perfectly safe, for the government guarantee will 
be behind every dollar invested. And the plan is per- 
fectly practicable, for since the government guarantee 



30 CAPITAL AND PROFITS. 

will be behind every investment and will guarantee a mini- 
mum dividend of at least 5%, and since the government 
will borrow or give its bond for all the surplus capital need- 
ed, it will be possible, as expert financiers affirm, to obtain 
the funds sufficient to take over any one or even ALL the 
consolidated industries of our coimtry tomorrow, if the 
people shall so desire. 

Farthermore, when this is done, we affirm that every 
thrifty man shall be enabled speedily to acquire and invest 
his quota of the needed capital and begin to reap his share of 
the dividends. For when the people shall thus come into 
power, by cutting in two exorbitant salaries* now paid to 
the men at the top, by eliminating graft, by saving the 
dividends now paid to watered stock, by increased efficien- 
cy, we can and shall so increase the wages paid to labor and 
so reduce prices, that every thrifty worker shall be able 
speedily to buy and own his full quota of the aggregate 
capital, and share in its rewards. 

8. 

Such is the concrete plan which it can be shown, social- 
ism must adopt for the reconstruction of the industrial 
world if we are to give to Capital and Profits their true 
functions, command the support of the people and remedy 
present wrongs. 

(I.) For in the first place, this is the only plan of in- 
dustrial reconstruction that will secure the collective own- 
ership of the plant and at the same time preserve the indi- 
vidual subscription and ownership of the capital and make 
the public business corporation to be the agent of the 
whole people for the production of individual wealth, — as 
effective industrial reconstruction demands. 



*Note: — By reducing the $100,000 salary of a single high official 
to $50,000, we could add $200 a year to the wages of 250 men. By re- 
ducing to the same extent the salaries of four such officials, we could 
add $200 a year to the wages of 1000 common workers. 



THE NEXT STEP IN OUR INDUSTRIAL EVOLUTION. 31 

(II.) In the next place this plan grows naturally and 
ogicallyoutof the present stage of our industrial evolution 
and it is the next logical step in our industrial develop- 
ment. // is no artificially created thing. For it takes the 
Consolidated Business Corporation, — ^which has been 
thousands of years in unfolding and, without attempting 
to abolish it or change its essential structure, it expands it, 
by law, so as to embrace the whole people and so carries 
its evolution up to the creation of industrial democracy. 

And this plan marks the next step in the progress of de- 
mocracy in acquiring control of the whole social order. 
For democracy advances in its control of the social order, 
by acquiring control, one by one, of the several special in- 
stitutions or organizations, of which the social order is com- 
posed. When the people made themselves masters of the 
government, they took the first step, in democracy and 
acquired control of all political functions ; when they ac- 
quired control of the Public schools they took the next 
logical step and made themselves masters of education; 
and now the time has come when they must take the next 
great step, and acquire sovereign control of the Consoli- 
dated business Corporation, and so make themselves 
masters of the whole industrial world. 

(III.) This plan will also overthrow, root and branch, 
as we can see, industrial autocracy, and make the people 
supreme over the whole industrial world. It will thus se- 
cure the very thing which socialism seeks to achieve. 
Marxists have asked — ^What is the difference between 
your plan and the present capitalist system? The dif- 
ference is as wide as the world — as wide as the difference be- 
tween an arrogant industrial autocracy and a real sov- 
ereign democracy. 

(IV.) And this plan will emancipate the worker. For 
this plan will make the whole people collectively to be the 
business corporation. But who constitute the vast ma- 



32 CAPITAL AND PROFITS. 

jority of the people? Is it the small band of astute men 
who now plunder and oppress us? No. The vast majori- 
ty of the people of these United States are the workers of 
hand and brain, — ^the wage-earners, the farmers, the 
teachers in the schools, the clerks and smaller business 
men. Hence, when once we make the people to be the 
business corporation, it means that the workers will be 
for the first time in htiman history , industrially supreme; 
and the power to fix all wages and salaries, all prices and 
dividends according to justice shall be placed in their 
hands. 

(V.) And this plan will challenge criticism as no 
other plan can, and successfully meet every objection. 

It is sometimes charged that socialism will enable the 
idle and shiftless classes to forcibly load themselves onto 
the backs of the industrious. And this fear, is no doubt 
one thing which keeps many persons from embracing so- 
cialism. But this result can never occur under the plan 
which I am advocating. For since, in this plan, we shall 
keep a record of the amount of work which each man per- 
forms and pay him only for the work which he does, and 
since each man will be required to pay justly for all that 
he buys, and since each shall receive a dividend only on the 
capital which he has actually invested, and since under this 
plan there will be no free pensions, it will be simply im- 
possible for any body to load himself undetected onto the 
backs of the industrious. 

Neither will it be possible for the incompetent to vault 
into supreme control and so ruin the business. For, in 
the first place, in this plan, no one will be allowed to be a 
candidate for any directorship or high position unless he 
has passed through some severe prescribed school of in- 
dustrial training and had a prescribed experience in a 
lower position — sufficient to test his ability. And second- 
ly, this plan will create such an intense individual interest 



THE NEXT STEP IN OUR INDUSTRIAL EVOLUTION. 33 

on the part of each voter, — for every voter will be a sov- 
ereign capitalist factor in the business corporation, — as to 
preclude the possibility of an incompetent person's being 
elected to any office of responsibility or, if so elected, he 
will be speedily recalled. For every person, — ^the busy 
housewife, the keen and alert business man, the thrifty 
worker, — all, will have their savings invested in this con- 
solidated business corporation and their dividends at stake. 
Each voter will stand or fall, financially, with the corpora- 
tion. Hence, on the least lowering of dividends, or the 
least rise of prices, or a fall in wages, — ^which will infallibly 
occur, if incompetency vaults into control. — ^there will be 
at once, an outcry from the whole people, and the incompe- 
tent official shall be peremptorially recalled. 

Objections have been made to socialism, on the ground 
that before it can be made successful, we will have to ''re- 
form Tammany," or ''change the government," or "re- 
form human nature." But under this plan, our business 
system will have no connection with Tammany, and while 
like the public school system, it shall be introduced and 
enforced by law and the government guarantee will be be- 
hind each investment, yet it will have no administrative 
connection with any government official, neither will it re- 
quire any change in himian nature to make it successful. 
Indeed, instead of having to do any of these things in order 
to make our plan successful as is claimed by objectors, it 
is the introduction of this plan, which will put Tammany 
out of business, reform the government, and regenerate 
the nature of man. 

Finally, objection has been made to socialism on the 
sweeping charge that, under public ownership, business has 
never been so successfully conducted as under private own- 
ership. But, even if this charge be true, it can be shown 
that it will not apply to this new plan. For in every form 
of public ownership tried heretofore, the motive that is 



34 CAPITAL AND PROFITS. 

necessary to secure careful management and control,~name- 
ly,the investment of individual savings for the earning of 
dividends, — ^has been eliminated, and of course there has 
been more or less of graft and failure. But in this new 
plan, this ftmdamental motive shall not be eliminated, but 
intensified and multiplied a million-fold, for every man 
shall be a capitalist factor in the consolidated business cor- 
poration; — every man shall be on the alert, as I have al- 
ready shown, to secure the best management possible, and 
to eliminate graft and achieve the greatest results. 

(VI.) Finally, this plan, viewed merely as a business 
proposition, offers a most attractive thing to all classes in 
the United States, except of course to the oligarchy in con- 
trol. 

For even if the wealth of this country were not increas- 
ed, yet, under this plan, every thrifty man can acquire at 
forty-five or fifty years of age, from $10,000 to $15,000 of 
the Preferred capital stock of this country; and since on 
this capital, he can receive as can be easily proven, a divi- 
dend or annuity of at least 10%, the income of each thrifty 
person over and above his wages, at fifty years of age would 
be from $1000 to $1500 a year. But this is not all. For 
with the rapid increase of wealth, which will surely take 
place under this plan, these results will be greatly increased. 

9. 

In conclusion I would say, that if all socialists would 
join in advocating this plan, I am confident that the social- 
ist party would speedily come into power. For wherever 
this plan has been presented to intelligent working men,it 
has received almost imiversal favor. Marxist speakers 
have addressed audiences of intelligent working people 
and failed to win a single convert. This plan has been pre- 
sented to the same audience and won universal and enthus- 
iastic support. It also meets with favor from large num- 



THE NEXT STEP IN OUR INDUSTRIAL EVOLUTION. 35 

bers of farmers, teachers in the schools, and smaller busi- 
ness men. For all classes can see that this plan will at 
once, overthrow industrial autocracy and make the people 
supreme over the whole industrial world. They can see 
that it will give the true place to Capital and Profits, as 
well as to Labor and will meet every economic need. It 
will bring justice and equal opportunity to every soul; it 
will convert the struggle for bread from being a savage 
warfare between nam and man, into a united, cooperative 
effort; and if, in the future, other changes must come, — 
even if Marxism must prevail, — ^this plan will prepare the 
way for all such changes in their own proper time. And, 
finally, they can see that this plan, viewed merely as a 
business enterprise, is a most attractive thing. They can 
see that it will abolish poverty; it will transform individual 
character; it will save the homxc ; and transform the world. 

Why not, then, adopt this plan at once as the next logi- 
cal step in our industrial evolution? 

All classes even Marxists should be able to do this. 
For while Marxists may not believe that this plan em- 
bodies the final goal of industrial evolution, yet they can 
accept it as the next logical step leading up to the final 
goal. 

I would urge, therefore, all socialists to squarely adopt 
the Stockbridge plan. I would make the adoption of this 
plan to be the issue in the coming presidential campaign. 
And whenever socialists come into power, I would urge 
them to apply this plan as far as possible to their Electric- 
lights, Water-works, Street-car lines, and other monopolies. 
I would urge them to enter into the full spirit of this 
plan and aim to make their socialized industries, to be not 
only a place where work can be obtained at a just wage and 
conamodities and services obtained at a fair price, but also 
a place where the people can invest their increasing savings 
with safety, profit and permanency, earn a good dividend 



36 CAPITAL AND PROFITS 



from them, and so free themselves from the slavery of toil. 
For this is the crowning service which the people now de- 
mand that our industrial system shall perform.* 



*Note: — In this pamphlet I have given only the briefest outline 
of the Corporation Plan of Industrial Reconstruction. For a full 
discussion of the Plan, every one should read, — Effective Industrial 
Reform. 



Three Stoclchridge Books and BooTclets on Socialism. 

Effective Industrial Reform 

St/ David C. Reid 

Stockbridge, Mass. 

Orders for this hook have been received from cities as far 
distant as St. Petersburgh, Russia, 

It car ef idly traces to its sozirce, the origin, power and 
evil effects of that feudalistic capitalism which now rules 
America. 

It solves the problem of industrial reconstruction. 

The plan which it proposes is advocated by the 
Socialists of Stockbridge, Mass., and man}'- others. 

7% X 5. 282 pp. Jlbout 60 illustrations. 
This hook is published by the author. 

Orders may be made through 

The Baker & Taylor Co., 
33-37 East 17th Street, New York. 

And other Pubhshers and Dealers in Books 
Cloth. Price, $1.35. Postpaid 



Two Important Booklets 

Capital and Profits 

By David C. Reid 

^ Points out the true function of Capital and Profits. Gives a careful 
criticism of Marx, and outlines the next step in our Industrial Evo- 
lution. 

36 pp. PRICE. 10 CENTS 



The Stockbridge Socialist Platform 

The platform adopted by the Stockbridge Socialist 
Club. It is based upon the principles unfolded in Reid's 
Effective Industrial Reform. 

PRICE 5 CENTS 



The Stockbridge SociaHst Press, 
Stockbridge, Massachusetts. 



LIBRARY OF CONGRESS 




013 775 428 9 t 



